| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Lord Rooker: My Lords, we debated this issue in Committee and I suspect that my reply today will be quite similar. I hope that it will answer the noble Earl's letter. If it does not, it goes without saying that, having written a letter, the noble Earl will get a reply anyway.
Clause 66 ensures that there will be a transition scheme to accompany any future revaluation. Businesses have stressed the necessity of transition schemes accompanying future revaluations. The details of a future scheme will be decided in the run up to the revaluation concerned but, as stated in the White Paper, Strong Local Leadership—Quality Public Services, any future transition scheme must be self-financing. There is no reason why the general taxpayer as opposed to the ratepayer should meet the cost of transition relief and, therefore, Clause 66 requires that the total rate yield for any year is not to be affected by a transition scheme.
The clause allows for flexibility in how schemes may be structured so as to be self-financing. The methods likely to be used include having a transition scheme that balances the rates lost through phasing in increases in bills against the rates gained by phasing in decreases. But, besides providing for a scheme which balances rate income lost through phasing in increases and rate income gained through phasing in decreases, the clause allows for an addition to rate bills generally as a means of making good the loss of rates resulting from phasing in increases in bills. That was all one sentence by the way. It has to be. It makes sense when you read it.
The clause also allows for a scheme that is funded by a combination of phasing in decreases and an addition to rate bills generally. This will allow us to put in place a fair and workable scheme.
If, as seems to be proposed by Amendments Nos. 59 and 59A, a scheme were to be revenue neutral over a five-year period instead of year by year as set out in the Bill, there would have to be a way by which the Treasury could recover in later years what it had paid in the early years. The Exchequer would also need to
recover interest on what it had paid out in the early years of the scheme and would need to recover a sum to offset the effects of inflation between paying out the sums concerned and recovering them. All this would make for complicated calculations which would introduce uncertainty for ratepayers. A five-year revenue neutral scheme would be much more complicated to operate and far less intelligible to the ratepayer than a scheme which was revenue neutral year by year.Furthermore, it is difficult to see any reason for such a scheme. Why should the general taxpayer in effect give a loan to ratepayers at the start of each transition scheme? An attempt to make a scheme revenue neutral over the five-year life of the list would mean that at each revaluation complex estimates would need to be made in advance of announcing any transition scheme. If at the end of the fourth year it was discovered that the Treasury had not recouped the money it had contributed in the early years, rate bills would have to be increased to balance the scheme. This would create uncertainty for the ratepayer.
Finally, Amendment No. 58 is designed to ensure that if over the life of the transition scheme it turns out that the scheme is in fact not revenue neutral but is producing a loss in rate revenue, the losses cannot be made good by adjustments to the scheme. In effect, the general taxpayer would have to make good the shortfall in funding for local government. However, if a scheme is not revenue neutral in that it is producing too much in rate revenue, the amendment allows for the scheme to be adjusted to recompense ratepayers. We made the point in Committee that this represents a one-way traffic flow that is very unfair to the general taxpayer.
As currently drafted, the Bill would allow for a transition scheme to be adjusted both if it was producing too much or too little in rate revenue. That is entirely fair. The noble Earl raised this point in Committee and I am surprised that the amendment has come back in much the same form. It is unfair and would be quite indefensible to the general taxpayer.
In the light of what I have said, I hope that the amendments will not be pursued. Obviously Third Reading awaits.
Baroness Hanham: My Lords, I thank the Minister for that reply. I understand that there are different ways of looking at how these transitional arrangements take place. But the inherent unfairness in the system as it stands is that people's contributions do not go down in the same way as their rateable valuations go down; they go down only in a transitional way. People with a lower rateable value who consequently have a lower payment are still paying at a higher level. People whose valuations go down are still contributing to people whose rates are increasing, because they are providing the transitional schemes. That seems inherently unfair from the outset. I can recall business ratepayers complaining to me about the scheme when it was originally introduced. I
am bound to say that it was not the current Government who introduced it. So we receive complaints from both sides.Our proposal for a different transitional scheme does not seem unuseful, but I see the Minister does not agree with me. I beg to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 59 to 59A not moved.]
Clause 68 [Exemptions for agricultural buildings]:
Baroness Hanham moved Amendment No. 59B:
- Page 34, line 33, at end insert—
The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendment No. 59C. This brings us back to the question of the initial designation of agricultural land for the purposes of exemption. It also brings us back to the definition of agriculture to include game farming and the definition of agricultural buildings.
We went through this issue at our last Committee sitting. I would not have brought it back if it had not been for the fact that the people who are concerned with the countryside were not at all happy with the Minister's response. He will not be surprised to hear that. There are grave concerns, particularly about the description of what amounts to game and the definition of rearing birds.
Amendment No. 59B deals with using agricultural land either solely or mainly for agriculture. If that amendment is made, it would, as we discussed extensively in Committee, facilitate what purpose that land could be used for that would still leave it with a rateable value.
At present, land used exclusively for agriculture is exempt from non-domestic rates. Agricultural land is defined as land used only as arable, meadow or pasture ground. There is a de minimis exemption permitting land to be used, to a limited extent, for other purposes which still enables it to qualify for the exemption. The Valuation Office takes this as being activities that do not last for more than one day at a time without an intervening period of agricultural use. So, by way of an example, one day's point-to-point will not prevent the exemption from applying. I daresay that a one-day pop concert, which is one way of raising money, would not either.
This may have been satisfactory when a farmer was only a farmer and did not need to use his land for anything else, but it does not reflect present realities. Few farmers, as we agreed last time, are able to make a living purely from their activities without having some amendments made.
Amendment No. 59C, which follows this grouping, refers to "game birds". I should like to pick up a point made in a letter to the Minister from the Country Land and Business Association, which is not clear about what the Minister said in an earlier debate. It is trying
The Minister said in Grand Committee,
Lord Rooker: My Lords, I am grateful that the noble Baroness has returned to this issue. I did not recognise the quotes from the letter of my friends in the Country Land and Business Association. My noble friend has ascertained that the letter was received only today. I am not conscious of either seeing or replying to it. It will receive a considered response.
As regards the noble Baroness's remarks about the countryside, I think that I am the only MAFF Minister ever to get a really positive mention on "The Archers". That was in 1998. So my country "cred" is pretty solid, believe you me. I shall not say what it was in connection with as all the animal lovers will be after me. I was trying to save cattle, if I can put it that way, but badgers were in the way.
We shall obtain clarification with regard to the letter. I do not have detailed notes on it. I gave a correct statement from my brief with regard to definitions. If the matter has been questioned, we shall have to take another look at it.
The intention of Clause 68 is to extend the rating legislation to reflect modern farming practices and also to ensure that the exemption from rates is properly targeted in relation to ancillary activities such as food processing and packaging operations where occupiers of related agricultural land control the company.
The Local Government Finance Act 1988 exempts from non-domestic rates agricultural land and buildings used for the production of food and the rearing of livestock for food. Agricultural land or buildings used for other purposes, such as the rearing of animals for leisure or sport, farm shops or food storage are not exempt and are liable for rates.
The tabled amendments, which I suspect are very similar if not the same as those tabled in Committee, would broaden the meaning of agricultural land in Schedule 5 to the Local Government Act and have the effect of opening up the rating exemption to activities that are not exclusively connected with farming. That would give farmers an additional competitive advantage over other new or established rural businesses.
If the purpose of the amendments is to facilitate minor diversification by farmers, I should point out that the Government introduced a rate relief scheme for that very purpose on 15th August 2001. The rate relief scheme for farm diversification was designed to help farmers diversify into small-scale non-agricultural activities by partly offsetting their rate bills for an initial period of up to five years. Farmers are now able to move into a whole range of activities, some of which will be in competition with existing business and others in totally new markets.
The relief is available to new enterprises on farms and, as it is aimed at small-scale enterprises, gives 50 per cent rate relief provided that the rateable value is £6,000 or less and the premises were in agricultural use for at least 183 days in the year prior to 15th August 2001. Local authorities also have the power to increase the relief up to 100 per cent if they think that it is in the interests of their council tax payers to do so. The relief is time-limited and will be available until 14th August 2006, although there is provision to extend that if there is a need.
In the light of what I have said, I hope that the noble Baroness will withdraw her amendment. I will make sure that we get a substantive reply to the CLA well before Third Reading. That will allow amendments to be tabled if needed in the full light of the Government's detailed response to the letter.
If food production is not the prime purpose, the exemption does not apply in the sense that I have explained it. I thought that I had said that in Committee, to be honest. However, I am philosophically very sympathetic to the issue. As I explained in Committee, I had not realised where the relief was, due to the definition of some game birds as opposed to poultry, but that has been the law for a
"( ) For paragraph 2(1)(a) (which defines agricultural land) there is substituted—
"(a) land used only or mainly as arable, meadow or pasture ground,"."
"We are unsure of the basis for your statement during the Committee stage debate that for business rate purposes, guinea fowl, pigeons and quails are classified as poultry".
This is a very important point and I am sure that the Minister wants to be clear about it. It is important for townsfolk to be clear about the matter. The letter continues:
"Contrary to what you [the Minister] said, this is not reflected in the relevant schedule. It is our understanding"—
that is the understanding of the Country Land and Business Association—
"that there is no clear definition as to what constitutes 'game' for these purposes. Certainly the courts have never given a clear statement. However, it is apparent that the farming of pheasants and partridges is not exempt and it is with these birds that we are principally concerned. In any event, we can see no justification for the present state of affairs.
In our view, the operations carried on at a game farm possess all the characteristics of a conventional poultry farm, that is birds are bred, reared and cared for in a commercial context and as such game farms should be treated in the same way as poultry farms. All the principles of livestock management followed by game farmers are the same as for poultry and the industry is subject to all"
the same laws.
"No one involved in game production for food will pay rates . . . They do not have a problem—they will be rate-free".—[Official Report, 16/6/03; col. GC 183.]
The association further states in its letter:
"We agree that this should be the case, the fact the birds are killed by shooting rather than any other method is immaterial, unfortunately though it is not a correct statement of the law as it stands".
There is clearly confusion about whether farming of game birds is exempt. I beg to move.
8.45 p.m.
Next Section
Back to Table of Contents
Lords Hansard Home Page